What costs are involved with a property management company?

Question

I'm thinking of buying a home and renting it out. I want to use a property management company to find potential renters and do background checks and write out leases, etc. How much does this cost? And do I only pay them when I have a renter?

Answer 1

The fees vary by area and cost to do business. In Middle TN it is common to charge a 10% management fee plus 50% of the first months rent. Cost to pull the credit report are charged back to the applicant. The management fee includes running 2 newspaper ads, site signage, the collection and distribution of rents collected to the mortgage holder, tax assessor, insurance carrier and you. They respond to calls from tenants regarding repairs or other issues as needed. They should also keep reports for you that your accountant will appreciate at tax time. Upfront money is sometimes required to pay for ads sometimes not. They will also escrow the rent deposit according to state laws and see that your lease is in compliance.

Generally, to the public they are well worth the expense. I prefer to not provide property management services from my office as it takes too much time from my more profitable side of the business for the amount of fees collected. Others would rather do that then any other aspect of real estate,

Answer 2

Each is different. Find a good reliable one. When I had a rental, we had a property company that did not rent out two of our units over 9 months. We changed management companies and both were rented within one month. So, do your homework. Ask the people who are using the company you are considering how it is going. Usually a company will charge a percentage on the rents collected and a one time rental charge each time the property changes renters. In addition, a lot of companies will hire out work that needs to be done on the property and charge you. You can get them to call you first so you can make arrangements - usually at a cheaper rate. For example, we had a tenant that locked themselves out of their apartment. The management company wanted to send a locksmith - cost would have been $95. But, since I had a key to each apartment, I was able to drive over and unlock their door for them.

Answer 3

Varies company to company. some fee a "placement fee" same to area a months's hire for the region of a tenant, then afterwards, they fee between 8 - 10% for management. some maximum effectual fee for the management & no placement fee.